New Jersey law firm Eichen Crutchlow Zaslow is battling in court with its malpractice insurance carrier over coverage for a lawyer's decadelong cover-up of a botched case.

Eichen Crutchlow sued Allied World Insurance Co. after it refused to cover a potential malpractice suit against former attorney Edward McElroy. The firm sued Allied World in Middlesex County Superior Court on Aug. 28, and the insurance company removed the case to federal court on Oct. 4. The suit seeks a declaratory judgment that Eichen Crutchlow is entitled to a defense and indemnification under the policy for a claim against McElroy by a former client, Dennis Bielski.

On July 18, Middletown attorney Michael Hanus gave Eichen Crutchlow notice that he was representing Bielski and intended to sue the firm for damages based on McElroy's handling of Bielski's previous slip-and-fall case. The firm forwarded the letter to Allied World, which replied on July 30 that it would withhold coverage and defense of the firm, according to Eichen Crutchlow's suit. The firm protested that decision, but Allied World stuck to its guns, according to the complaint, which did not say why the insurance company withheld coverage.

The conflict has its origin in 2002, when Bielski retained McElroy to represent him in a slip-and-fall case against the operator of a truck terminal. The suit was dismissed in August 2007 after Bielski failed to show up for a medical exam arranged by the defendant. Although Bielski eventually appeared for the exam, a judge denied McElroy's motion to reinstate the case. The complaint says McElroy brought an appeal, but it was dismissed in April 2008 after the attorney “failed to perfect” it, the suit claims.

McElroy failed to notify his firm that the appeal was dismissed, and apparently failed to notify his client as well, according to the Eichen Crutchlow lawsuit.

McElroy then proceeded to misrepresent to Bielski for approximately 10 years that the case was still active, and never told his firm colleagues about the communications with Bielski, the suit claims.

In 2017, Bielski apparently came to believe McElroy was not telling him the truth about the status of the case, and announced he was planning to hire another attorney to handle the case. McElroy then told Bielski the case had settled for $800,000, and eventually gave Bielski a check for $425,000. McElroy said that payment represented the client's share of the settlement, less attorney fees and costs, but the funds came from McElroy's own bank account, the suit said.

Bielski, who signed settlement documents drawn up by McElroy when he accepted the $425,000, soon realized the documents were fake, and contacted Eichen Crutchlow, Hanus said.

Eichen Crutchlow has nine attorneys listed on its website, and focuses on personal injury law. At some point, the firm was known as Eichen Crutchlow Zaslow & McElroy.

Eichen Crutchlow first learned in or around January of “McElroy's numerous and various acts of alleged professional negligence and the fact that he, beyond the scope of his authority, failed to disclose these events to the Firm,” the lawsuit said.

Hanus said Eichen Crutchlow fired McElroy and reported him to state ethics authorities when it learned of his actions in the Bielski case.

No malpractice suit has been filed so far, Hanus said. Hanus said McElroy's handling of the Bielski case appears to be an “isolated incident” and that Eichen Crutchlow has acted “honorably and equitably” toward his client.

Donald Ottaunick of Cole Schotz in Hackensack, who represents Eichen Crutchlow in the insurance case, declined to answer questions about the case. McElroy could not be located. Gerald Ford of Landman Corsi Ballaine & Ford in Newark, who represents Allied World, did not return a call for comment.